Summary of Q&A for Results Briefing of Fiscal Year 2023 held on May 17,2024

Although natural catch volumes will have an impact, we expect the marine products market to improve due to factors such as the rising prices of imported marine products caused by the yen's depreciation. The demand for marine products remains stable, influenced by the high prices of livestock proteins and other factors.

The FY2024 plan incorporates rising feed costs. Since natural catch volumes influence market conditions, passing feed costs to prices is difficult. To address this, we aim to improve profitability across the domestic aquaculture business through measures such as improving productivity and increasing production volume with larger fish cages (Japanese amberjack), strengthening profitability through deeper cooperation between two aquaculture companies (tuna), and expanding aquaculture facilities and acquiring processing plants in Rikuzentakata City (coho salmon).

We expect the marine products market to recover and have incorporated a slight increase in catch volumes. However, due to the differing aquaculture environments in the southern and northern regions, the fish cage operation will negatively impact the survival rate in FY2024. Additionally, we foresee significant impacts from increased aquaculture costs due to rising feed prices.

EMDEPES has significantly contributed to products derived from white-meat fish since its establishment. However, new entrants cannot join this business due to the regulations of the Chilean Fisheries Law. The continuous losses are mainly due to halving the Hoki catch quota around 2020. We can achieve profitability through market expansion by increasing fillet production, but we need to evaluate the future continuation of the business carefully.

UniSea has contributed to Nissui's global business for nearly 40 years, but it faces challenges due to significant changes in its cost structure. Moving forward, we expect to increase the production of high-margin fillets and reduce the fixed cost ratio by acquiring new Alaska pollock resources.

In FY2024, we expect a decline in profitability compared to FY2023 due to uncertainties such as rising logistics costs. Moving forward, we will continue to implement revenue and expenditure management on an item-by-item basis and consider price revisions in the second half of the year if the yen depreciates to a certain extent.

The plan incorporates rising logistics and promotional expenses to address declining sales volumes. In FY2023, the overall sales volume of the domestic Food Products Business fell below 95% of the previous year due to price increase fatigue, and further declines in sales volume would worsen productivity and increase costs. Moving forward, we aim to enhance profitability by implementing measures such as volume increase campaigns to gain the acceptance of retailers and mass merchandisers and increase the sales volume of value-added products like Fast-Twitch skeletal muscle protein.

Products priced around 100 yen per pack or lower maintain their sales volumes, but their consumption of over 200 yen is declining. Moving forward, it is essential to implement measures to boost the consumption of products with declining sales.

Due to increased sales volumes, we expect increased profits in the household segment, primarily using raw white-meat fish materials. In the commercial segment, which mainly uses raw shrimp materials, stable profit was secured in FY2023 due to lower raw material prices. Still, the FY2024 plan incorporates factors such as price adjustment for the decline in raw material prices.

Initially, we planned to apply for the export of high-purity EPA pharmaceutical raw materials to Europe in 2023. Since we had obtained approval in Japan and the United States, we expected to get approval smoothly in Europe as well. However, Europe has stringent standards, and we received several points of feedback regarding the component analysis of EPA, which delayed the application process, which was completed in February 2024. We have not included the export of EPA pharmaceutical raw materials in the FY2024 plan because we conservatively estimated that Europe would require a different approach than Japan and the United States. We can ship once approval is obtained. Regarding shipments to the United States, it depends on the customer's inventory situation, so we cannot comment.

In FY2022, operating cash flow was minimal due to higher inventory levels amid the COVID-19 pandemic, but the situation improved in FY2023. We do not anticipate significant fluctuations in FY2024, so we expect approximately 30 billion yen, the average of the past two years.